According to official figures from the Office for National Statistics (ONS), the rate of inflation in the UK has decreased to 10.5%, down from 10.7% in November.
The decline in the core consumer prices index (CPI) measure of inflation was attributed to lower costs for motor fuels, clothing and footwear, and recreation and culture. This is the latest indication that the UK may be experiencing a decrease in inflation, as the number is now lower than the 41-year high of 11.1% recorded in October.
Inflation can significantly impact retail by affecting the cost of goods and services. When the cost of production increases due to inflation, retailers may pass on those increased costs to consumers in the form of higher prices. This can lead to a decrease in consumer spending, as people have less disposable income to spend on non-essential items. Additionally, inflation can also lead to a decrease in consumer confidence, as people may become more cautious about spending money if they believe prices will continue to rise.
Nicholas Hyett, Investment Analyst, Wealth Club commented: “Inflation continued to slow in December, and now looks to have peaked in October last year.
Lower fuel prices have been a major contributor to the slowdown, and with oil prices now back around where they were before the Russian invasion of Ukraine, there’s likely to be further to fall on that front. As a crucial input into other areas of the economy, lower oil and fuel prices should ultimately ease pricing pressure across the board – although it will take time for the benefit to feed through to people’s purses.
For now, the cost of living crisis is set to continue. 10.5% inflation may be better than we’ve seen recently but is still eye-watering by most standards. A winter of strikes ahead yet see ‘stickier’ wage driven inflation gathering pace too.
Still, the government and Bank of England will be encouraged by these numbers. If inflation is trending down naturally then interest rates may not need to go so high, which will at least keep debt more digestible for consumers, companies and countries around the world.”
